Sciencelover - What is crypto staking that is considered effective as passive income, when the crypto market is ducking? During this time, t...
During this time, trading was considered the only way to profit from crypto. In fact, there are other ways that can be tried. One of them is through crypto staking.
Crypto staking is an attractive alternative, especially after the cryptocurrency market experienced a massive decline in early 2022.
Interestingly, you can also collect passive income through crypto staking. Actually, what is crypto staking and what is the mechanism so that it can be used as passive income?
What is Crypto Staking?
Crypto staking is the process of “handing over” a certain amount of cryptocurrency that you own to a Blockchain network. Later, these assets are used to develop their network. For example, to improve the transaction confirmation method.
Profits come from the interest on crypto assets that you have submitted to the network. The interest will be given as a reward, along with the return of the crypto asset.
It can be concluded, the way it works is similar to saving a time deposit in a bank.
How to Staking Crypto
Actually, the staking mechanism means it's not that complicated. However, staking can only be applied to certain cryptocurrencies. Precisely on cryptocurrencies that apply a proof-of-stake model, not proof-of-work like Bitcoin.
In simple terms, the staking mechanism works like this: You and several other people submit a certain amount of cryptocurrency on a Blockchain network. After that, the network selects you as a validator to confirm all transactions.
If the validator successfully confirms, then you and other people who have submitted their crypto assets are entitled to a reward in the form of new crypto coins (usually in the same crypto currency).
How is a person appointed as a validator? Generally, validators are selected from the number of crypto assets they submit. The more assets submitted, the greater the opportunity to become a validator.
Crypto Staking as Passive Income
To start collecting passive income by staking crypto is quite simple. Broadly speaking, here are five steps you should take:
1. Choose a cryptocurrency
Make sure to choose a cryptocurrency that applies a proof-of-stake model to their Blockchain consensus mechanism.
Staking cannot be applied to proof-of-work cryptocurrencies because the validation system is decentralized. That is, there is no one permanent authority that acts as a validator.
2. Know the minimum stake
Each Blockchain network has its own rules regarding the minimum amount of staking. Look for the latest information about these rules on the Blockchain network you are aiming for.
3. Create a crypto wallet
The next step is to create a crypto wallet. Currently, there are many choices of crypto wallets that you can customize to your needs.
Some even provide a mobile version that is easy to access and monitor progress. No need to rush in choosing, make sure the crypto wallet you choose is guaranteed credibility.
4. Start staking crypto
After all the preparations are complete, you can start staking. Submit your crypto assets to the staking pool.
Another way is to stake through the cryptocurrency you have chosen. Usually, cryptocurrencies with a proof-of-stake model already provide an option for staking. You can simply access their official page.
5. Done!
The staking process is complete. Now you just have to wait for the Blockchain network to choose a validator. Most staking pools now provide information on the percentage of interest, so you can easily calculate the estimated profit that will be obtained.
Crypto Staking Advantages and Risks
Staking helps you to better manage crypto assets. By staking, the chances of getting more crypto coins are even greater.
At the same time, this method also helps the Blockchain network to grow through the assets you lend.
Looking at the impact on the environment, staking is also relatively more environmentally friendly than mining which requires a lot of energy.
Even so, that does not mean staking does not have risks. In staking, the biggest risk is the vesting period. During this period, you cannot withdraw crypto.
Sometimes, there are networks that do not announce the exact duration of the vesting so it is difficult to calculate the potential profit/loss.
Well, that's what crypto staking means, which can be an easy and profitable alternative while waiting for the cryptocurrency market to recover, especially if you want to generate passive income from your crypto assets.
Interested in starting to collect passive income through staking crypto?
